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Question:

Please explain this! I live in New York, which is no-fault auto insurance state and I had all the required insurance on my car. I was distracted by my children, who were arguing in the back seat, and I accidentally went through a stop sign. I hit a car going across the intersection and injured the driver. I just received a notice that he’s suing me for $250,000. I thought that if you had no-fault insurance, you were protected from lawsuits for car accidents.

Answer:

If it
makes you feel better, you’re not alone in your confusion—no-fault auto
insurance is a complex, commonly misunderstood, and fairly misleading topic.

No-fault is meant to provide a fast, hopefully efficient,
mechanism for compensating people for smaller personal injury claims
without recourse to courts. However, if there is personal injury exceeding the
limits of the insurance coverage, the plaintiff can often (but not always; see
below) sue for the excess; and they can also usually sue for non-bodily injury
claims.

New York’s automobile insurance law requires the following
coverage (as a minimum; you can always buy more):

Personal injury
protection, which pays for the insured’s own medical costs, lost wages,
and necessary replacement services (such as housekeeping, if you can’t
keep house), up to specified limits

Liability, which pays for
other people’s injuries and for property damages

If someone who has PIP coverage in NY is injured in an
accident, they can’t sue for bodily injury (the medical costs, lost wages,
etc.) up to the limit of their insurance—so as long as their injuries come in
at less than their insurance coverage, there’s no lawsuit.

HOWEVER—and it’s a big “however”—they can sue for:

Economic losses from
bodily injury in excess of the insurance limits—and given how expensive
medical care is, it’s not hard to see how their PIP coverage could be
exceeded

Property damage, such as
damage to their car—that’s why you have property damage liability coverage
in the first place

Pain, suffering, loss of
consortium, and emotion distress IF they suffered a “serious injury” as
defined in section 5102 of the insurance law—basically, death,
dismemberment, or a serious, long-lasting disability will all qualify to
enable the injured person to sue

No-fault auto insurance therefore provides substantially
less protection against law suits than is commonly supposed.